Merck (MRK)  has been struggling lately with its pipeline and it had to take steps to stage a comeback with a new form of revenue. Recently the success of Gilead's (GILD) Sovaldi has sparked a huge phenomena for the Hepatitis C market, and rightly so because Gilead made about $2.3 billion dollars, in one quarter, from Sovaldi sales. Analysts predicted much less in sales by about $1 billion dollars roughly, so Sovaldi hit the ball out of the park with a home run. Today Merck paid $3.8 billion dollars to acquire Idenix Pharmaceuticals (IDIX) or $24.50 per share. So why on earth would Merck want to acquire Idenix Pharmaceuticals if Sovalid is already in the race and gaining a huge chunk of the Hepatitis C market?

Well for Starters Merck thinks that even Sovaldi won't be opportunistic to be combined well with other drugs to treat hepatitis C patients, and that the entire market won't be captured so quickly. Also Merck has been working closely with other drug compounds of its own for Hepatitis C, and they believe they can achieve even greater efficacy for patients by a huge margin. This huge margin would occur by combining Merck's current Hep C drug compounds together with a nucleoside analog drug and cure Hep C patients between 3 to 6 weeks. Gilead's Sovaldi is also a nucleoside analog drug compound, so Merck can't have any access to experiment with that drug, but Idenix's drug compound is all open game for anyone for the taking.

Merck believes that by combining its current Hep C drug compounds together with Idenix's Nucleoside drug compound it can cure patients in a much shorter time frame. Whether that is likely to be true remains to be seen, but Merck feels that this acquisition is worth the chance to see if something good comes out of it. We don't fault Merck for attempting this because it has the opportunity to capitalize on something that may prove to be successful for the company's bottom line. With the ability to cure patients with Hepatitis C in a smaller time frame it can easily compete with Gilead's Sovaldi, and may eventually capture more of the Hepatitis C market.

In any event, doing so benefits Merck as these treatments are needed for the 140 million chronically infected Hepatitis C patients worldwide, and previous treatments dealt with toxic Interferon and Ribavirin which left many patients feeling very sick. Although Merck got a good deal out of it because the $3.8 billion dollars it spent today, was nothing in comparison for Gilead buying Pharmasset for $11 billion dollars. So Merck has a shot to increase its share price for shareholders and potentially bring a new blockbuster drug to market. The only drawback is that it will take time to test out the acquired nucleoside analog compound together with Merck's own Hepatitis C drug compounds.

In the meantime Gilead's Sovaldi will establish a pretty strong position in the market so Merck has to hope that this acquisition will pay off big time in the long run. This deal is a savior for Idenix shareholders, because back in February 2014, the FDA contacted Idenix and put a hold on its other Hepatitis C drug compounds that were nucleotide polymerase inhibitors. The reason for the initial halt by the FDA and then stopping the trials of these compounds was the fact that Bristol-Myers Squibb had problems with the same type of compound. The problem with the Bristol-Myers Squibb trial was that nine of the patients being treated for Hepatitis C with nucleotide polymerase inhibitors were hospitalized, and there was one fatality.

We believe that Merck may come out on top but it will take time for the trials to show top-line results. Merck is at a pretty good valuation so many investors can buy the company now for the dividend and the possibility of future growth. Like anything in biotechnology this acquisition is not a sure thing. The deal is set to be done in the 3rd quarter of 2014 so investors will have to watch and see what transpires over the coming months for Merck.